Overall Strategy

The overall strategy adopted by Toys R Us is centred on the differentiation of their product lines. This captivates a wide range of customers and therefore maximises sales potential. Toys R Us are able to do this with the clear outline of departments within each store that all specialise in a diverse ranges of products. Toys R Us currently stock branded good as part of their overall strategy, as this can lead to the retailer building a reputation for selling high quality products and consequently achieve a loyal customer base. The key drivers for Toys R Us are that they are the biggest toy specific company in the UK. This status alone drives sales, as customers will be able to find a large range of toys in the one shop. Another driver for the business is the brand name Toys R Us has built over the past 23 years. This has created the image that Toys R Us is a safe, reliable organisation that are specialists in the toy industry. Consequently brand loyalty to the company has been created, therefore increasing the number of returning customers. The business should do their utmost to maintain this perceived brand.

Competitive Analysis
The toys and games industry is highly competitive in the UK. Products are sold through a wide range of sales channels. Not all retailers in this industry sell toys exclusively; some are major competitors in other markets. The percentage of toy and game sales in each retail channel in 2007 is shown in Figure 4. Figure 4 Percentage of toy and game sales in each retail channel in 2007.

The three main types of outlet in the toy industry, as seen above, are mixed retailers, toy stores/specialists and catalogue stores (Keynote, 2008)

Analysis of Retailers
There are only three potential generic strategies to outperforming other firms in an industry: overall cost leadership, differentiation and focus. (Royer, 2005) Cost leadership This strategy involves gaining advantages by reducing economic costs below that of competitors.

Differentiation - This strategy removes the product from the most direct elements of competition by differentiating the marketing mix to the different buyer groups. Focus This strategy involves operating around a certain focus, these could be based upon a price, quality or service focus. (Hollensen, 2003)

Mixed Retailers
Mixed retailers sell a variety of products and therefore compete in a variety of markets. Together, these companies control the largest segment of the toys and games market. A selection of mixed retailers are analysed below: Woolworth This company is a mixed retailer yet is focused on home, family and entertainment. They operate in midsized high street stores (FAME, 2008). There are 820 Woolworths stores in the UK. (Woolworths, 2008) Supermarkets Supermarkets, especially larger stores such as Tesco, Asda or Sainsburys often have a small range of toys and games on sale. These retailers particularly benefit from seasonal sales, for example, at Halloween and Christmas. The following table has been created after studying relevant theories and comparing Toys R us against its competitors. Table 3 looks at why and how the mixed retailers compete with Toys R Us. Table 3 Mixed Retailers Supermarkets E.g. Tesco Why they are Competitors to Toys R Us? How they compete with Toys R Us?
Mixed Retailer

Woolworths
Mixed Retailer

They offer lower priced products Benefit from

They offer lower priced products They offer more

spontaneous sales Loyal customer base that returns Convenience

convenient stores

Toy Specialists
These stores specialise in toys and games. By doing this they gain some advantages of specialisation including product specific marketing along with greater expertise and experience in the area. This group of retailers is the one in which Toys R Us competes as the market leader. Toy stores will be analysed in more detail with reference to companies market positions and competitive strategies and compared to Toys R Us:

Early Learning Centre

As the name suggests this retailer competes by specialising in educational toys for children. Since the mid 1970s the early learning centre (ELC) has expanded and now has 215 stores in the UK (ELC, 2008). ELC had sales of 174.4 million in 2007 (FAME, 2008).

Disney Store

The Disney Store sells toys and games based on Walt Disney characters from movies and TV shows. They are the only store to do this and therefore specialists. The company benefits from the success of Disney movies and the strength of the brand name. They have 56 stores in the UK (Disney, 2008), with sales for the in 2007 totaling 91.7 million (Keynote, 2008).

Hamleys of London

Hamleys originated in 1760s London. It now has 16 stores in the UK and turnover of 35.8 million in 2007 (Keynote, 2008). Hamleys has an emphasis on quality and a reputation to match, helped by their long history of toy manufacturing and sales. Their specialist marketing position is based around high quality and high price (Hamleys, 2008).

Smyths

In Northern Ireland Smyths toy store competes with Toys R Us. Last year the firm had sales of 2.54 million in their 6 Northern Ireland stores alone (Keynote, 2008). Smyths are currently in the process of expanding into the UK market with 11 stores in the mainland. Similar to Toys R Us, this company uses megastores and opens 7 days a week (Smiths, 2008). Smyths operate in a similar style to Toys R Us and are currently followers in the market. The threat exists however that they will soon expand to become challengers for the market leader status in this group of retailers. Appendix 3 shows the relative sales figures and profit margins of these toy retailers.

The following table has been created after studying relevant theories and comparing Toys R us against its competitors. Table 4 looks at why and how the toy specialists compete with Toys R Us. Table 4 Toy Specialists Smyths Disney Hamleys Early Learning Centre
Infant Toy Retailer Market Nicher

Why they are Competito rs to Toys R Us? How they compete with Toys R Us?

Toy Retailer Market Follower

Disney Toy Retailer Market Nicher

Luxury Toy Retailer Market Nicher

They offer the same products

They offer a wider range of Disney branded products

They offer higher quality products

They offer a unique service

They have a similar store structure

They are educational ly based

Catering for high end customers

Better knowledge on Disney products

They compete on pricing

Catalogue Stores
Catalogue retailers save on overhead costs by displaying their products in a catalogue rather than a shop floor. This method negates the need for a large selling area and enables customers to view products from home. These companies are generally mixed retailers in terms of the range of products offered but their collective success in gaining market share has led to them being classed separately. Major catalogue retailers are briefly outlined below:

Argos

Argos is a catalogue retail company offering home delivery or store collection. They have been a major competitor in the toys and games industry for 35 years. Argos is a large company with over 700 stores in the UK, employing 34 thousand nationwide (Argos, 2008).

Tesco Direct

Tesco is the largest supermarket chain in the UK. Recently Tesco have diversified to offer a home delivery catalogue featuring a wide range of products at lower prices than retail stores. Its product range includes a selection of toys and games. The launch of the new catalogue has changed them from being a small competitor in the toys and games market to a major one (BBC, 2008). The following table has been created after studying relevant theories and comparing Toys R us against its competitors. Table 5 looks at why and how the catalogue retailers compete with Toys R Us. Table 5 Catalogue Retailers Argos Why they are Competitors to Toys R Us?
Catalogue Toy Retailer

Tesco Direct
Catalogue Toy Retailer

How they compete with Toys R Us?

They compete on pricing

They offer lower priced products

Offer more than just toys and games

Offer more than just toys and games

They offer more convenient stores

They offer more convenient stores